A Walkthrough Electoral Bonds

What are Electoral Bonds?

Electoral bonds are instruments that can be used by individuals or organizations to make donations to political parties. In an eli5 fashion, these are legal donations that corporates and individuals make to political parties.

The Way Before Electoral Bonds

Before electoral bonds were introduced, political parties had to make a public announcement for all donations amounting more than INR 20,000. Furthermore, corporates couldn’t donate more than 10% of their revenue to any political party.

Introduction of Electoral Bonds in 2018

The then Finance Minister of India, Arun Jaitley, passed a bill introducing electoral bonds in early Jan, 2018. The ruling party justified that these bonds would accept donations only through one bank, State Bank of India (SBI). No cash donations would be allowed, reducing corruption.

These arguments, however, were thrashed in the Supreme Court hearing, where Advocate Bhushan said that electoral bonds are creating alternative white money channel, replacing older disclosure-based channels such as RTGS and netbanking with anonymized bonds.

Also, note that the Reserve Bank of India (RBI) opposed electoral bonds, stating that this would increase black money circulation, money laundering, and so on. Mr. Jaitley went ahead with the bill anyway.

Benefit of Electoral Bonds to Donors

Electoral bonds attract tax benefit in the form of 80GGB / 80GGC. There is no cap on the donations made.

The petitioning lawyers in Supreme Court also pointed at the possibility of corporates being able to use shell companies for donations, since the limitation of donation amount capped by revenue numbers was removed.

There have also been allegations of these donations winning contracts for the donor. Case in point – the much-discussed case of Megha Engineering winning the Thane-Borivali twin tunnel project (worth INR 14,460 Cr.) after purchasing sizeable bonds (over INR 140 Cr).

Why Supreme Court Scrapped Electoral Bonds

Apart from the few reasons mentioned earlier, the five-member bench announced the electoral bonds to be unconstitutional and undemocratic.

• The anonymous nature of electoral bonds kills Right to Information. As a citizen of India, I should have the right to know how the political party is securing funds.
• Over 50% of the donations went to the Central or State ruling parties. Not even 1% of donations were received by opposition. This makes the ruling party stronger, and opposition weaker. We can’t be called a democracy if there is no opposition to voice concern against bills and decisions that may not help the citizens.
• The spending per candidate for any election is capped by the law (< INR 1 Cr.); however, since the number of seats won by the ruling party are much larger, they can spend a much higher amount in campaigning, making it even more difficult for the opposition to win seats. For instance, party A is a major party contesting for 300 seats. They can spend ~INR 300 Cr for their Lok Sabha campaign. On the other hand, party B maybe contesting for only 5 seats, will always be overpowered by the larger party.
• As a shareholder of any listed company, you do not get the details of which party your company donated to. Furthermore, there is no record on how political parties use their funds – if they were actually used for growth initiatives.

SBI’s Preliminary Report

Future Gaming and Hotel Services Pvt. Ltd. emerged as the top donor with a total of INR 1386 crore being donated to different political parties. Trinamool Congress (TMC) received INR 542 crore of this total sum. TMC was the second-largest beneficiary of electoral bonds.

Megha Engineering & Infrastructures Ltd. (MEIL), a Hyderabad-based company, was the second-largest donor with a total of INR 966 crore donated between 2019 and 2022. Out of this, INR 584 crore went to the Bharatiya Janta Party.

The five top donors of Bharatiya Janta Party are MEIL (INR 584 crore), Qwik Supply Chain – liked with Reliance Industries Limited (INR 375 crore), Vedanta group (INR 230 crore), Bharti Airtel (INR 183 crore), and Madanlal Limited (INR 175 crore).

The five top donors of Indian National Congress are Vedanta (INR 125 crore), Western UP Transmission Co (INR 110 crore), MKJ Enterprises (INR 91.6 crore), Yashoda Super Specialty Hospital (INR 64 crore), and Avees Trading and Finance Ltd (INR 53 crore).

The complete data hasn’t been released yet, with a major chunk of donations still unaccounted. Political parties have been wary of sharing any data, with TMC making a silly statement that they don’t have any data of donors as people dropped electoral bonds in their dropbox.

Closing

What started as a protest from an NGO in 2017, had the final hearing on Feb 15, with the Supreme Court annulling the scheme. The apex court also dismissed SBI’s pleas where they requested an extension to their timeline to submit details of all donations.

As a citizen of India, I feel it is extremely important that democracy continues to thrive. Electoral bonds were massively tilting the scales in favor of the ruling parties. This would vanish the opposition, ultimately killing democracy.

Since years, governments have been trying to enforce methods to make political donations more transparent, and failed. The ex-Chief Economic Commissioner, Krishnamurthy, suggested setting up a National Election Fund wherein corporates would contribute without direct affiliation to any specific political party, allowing a fair playing field. INC had proposed the NEF in its 2019 agenda and are promoting it again in the current light of things. What happens next, will depend on the upcoming elections, and how strongly opposition parties desist unjust bills like electoral bonds.